Oil slips to near $72 as traders eye crude demand

SINGAPORE: Oil prices fell to near $72 a barrel Thursday in Asia as investors mulled whether recent signs of recovering crude demand can be sustained next year. ( Watch )

Benchmark crude for January delivery was down 33 cents to $72.33 at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange.

On Wednesday, the contract surged by $1.97 to settle at $72.66 after the Energy Information Administration said that crude supplies and distillate fuels including heating oil dropped by more than analysts expected.

Some analysts are skeptical that demand growth can continue beyond the middle of next year as the impact of massive government stimulus spending begins to ebb.

London-based Capital Economics expects oil to fall to near $50 a barrel by the end of next year on weaker than expected demand and a stronger U.. dollar. Investors have often bought commodities such as crude this year as a hedge against inflation.

``As the boost from policy stimulus starts to fade and underlying weaknesses reassert themselves, demand should slow again,'' Capital Economics said in a report.

``If we are right that the U.S. dollar resumes its recent recovery and fears of inflation and asset bubbles fade, oil prices should drop back next year too.''